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supra. See Estate of Bosch v. Commissioner, 387 U.S. 456 (1967).
Petitioner has not utilized its control over AFLIC so as to
improperly shift income. Rather, there has been a deflection of
income by operation of Mississippi State law. See Procter &
Gamble Co. v. Commissioner, 95 T.C. at 341.
Accordingly, we hold that an allocation under section 482 is
unwarranted and an abuse of the respondent’s discretion.
Issue 2. Bad Debt Deduction
Petitioner took a deduction under section 166(a) for the
Cooper debt which AFLIC assigned to AFIC in July 1989.8
Section 166(a) provides a deduction for any debt which
becomes worthless during the taxable year. The amount of the
deduction for a bad debt is limited to the taxpayer’s adjusted
basis in the debt as provided in section 1011. Sec. 166(b);
Perry v. Commissioner, 92 T.C. 470, 477-478 (1989), affd. without
published opinion 912 F.2d 1466 (5th Cir. 1990). Whether, and
when, a debt becomes worthless is determined by looking at all
the facts and circumstances including the value of the
collateral, if any, securing the debt and the financial condition
of the debtor. Sec. 1.166-2(a), Income Tax Regs. Generally, a
8 Since AFIC was a member of the affiliated group with
petitioner, AFIC’s operations were included in the consolidated
filing. Sec. 1.1502-76(b)(1), Income Tax Regs. The common
parent shall be the sole agent for each subsidiary in the group.
Sec. 1.1502-77(a), Income Tax Regs. As common parent, petitioner
is authorized to petition and conduct proceedings before the
Court on behalf of all members of the group. Id.
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